Thread by @realkelvin07

Rinu,

Thank you for your question. So in 2007, Soludo and OBJ created a provision in the CBN Act, that allows for the Federal Government to borrow from the Central Bank as a lender of last resort, in case they have a budget shortfall (and there's nowhere else to go)

https://twitter.com/SavvyRinu/status/1653818518574342151

And capped the limit at 5% of the total revenues the government gets from the previous year.

Between 2007 and 2015, President Yar'adua and GEJ took only a combined total of #869bn from this window.

Whereas, in the last 8 Years, President Buhari has collected 23.7 trillion naira

from this window, that has raised the total outstanding stock to 24.5trillion, and that is a 2,819% violation of the 5% cap. Imagine going from 5% to 2,819%.

And this is directly responsible for currency depreciation and devaluation you've seen with the naira, because when a

Central Bank prints money it doesn't have reserves to back (through a process called Quantitative Easing), the currency depreciates, and the Central Bank is forced to devalue officially to align official and parallel market rates.

This depreciation and devaluation leads to

hike in inflation and the corresponding hike in interest rates that we have seen so far.

Remember that the naira dropped from 365 to 745 btw 2019 (When Saraki who opposed this left as SP) and 2023),

Well, the reason is because within this time, the Central Bank gave #15trn

to the Federal Government as advances to cover budget deficits and fund direct intervention programs, that both the CBN & Ministry of Finance cannot account for today.

Now Overdrafts attract annual interests of 21% and according to the 2023 budget, the FG is due to pay #4.2trn

as interest on that 24.5trillion in loans,

So what they've done with this is transfer the responbility of payment to Nigerians through a 40-Year government bond that attracts 9% interest per annum, with a grace period of 3-Years (moratorium) before they start paying interest.